It is imperative that steel trading enterprises prudently diversify and improve the credit system

"Financing difficulties" has become a common problem for domestic companies this year, and local governments are frequently exposed to the news that funds have been broken and the bosses are running. For the steel trade industry, steel trading has a large demand for funds. At the same time, practitioners are mostly private or small and medium-sized enterprises. Similar rumors also appear. At the same time, the meager trend of the steel industry itself seems to be increasingly evident. Many companies have begun to consider transitions, and some have even become involved in unfamiliar real estate, mining, and private lending. The pressure on companies in the steel trade field is getting bigger and bigger. As for financing problems, as for the development of the industry, as for business models, companies also seem to become even more confused.

The newspaper recently conducted an exclusive interview with Zhu Junhong, president of Shanghai Steel Union Electronic Commerce Co., Ltd., and Yu Huabin, president of the Metallurgical Finance Division of Minsheng Bank. Minsheng Bank is the first banking institution in China that focuses on the metallurgical industry and has a unique understanding of the financing needs of the steel trade sector. Shanghai Steel Union has been collecting steel basic data for more than a decade and has continued to pay attention to the steel trading sector. In June 2011, it successfully landed on the Shenzhen GEM.

In their opinion, this year's steel industry has indeed encountered the problem of financing difficulties, but the phenomenon of capital funding is still rare. In the current environment, on the one hand, financial institutions must also focus on corporate needs, increase financial innovation, and provide support for enterprises to get out of trouble; on the other hand, the steel trade industry also needs to start from its own, establish and improve the credit system, standardize operations, and improve services. The added value, especially careful treatment of diversity, controls risk.

Financing Difficulties: The dualization of credit is the key to restricting the financing of SMEs

Daily: Can Zhu always brief us on the status of the steel industry this year? How do you view the development prospects of the steel industry?

Shanghai Steel Union: This year's steel industry practitioners feel more pressure than ever before. The cost of raw materials such as iron ore is high, production capacity and production are growing rapidly, and the state of micro-profits in the industry is even more prominent.

This year, the global economy is facing downward pressure. The demand for steel, especially the "intermediate demand" formed in the trade sector, has shrunk to some extent. This is also an obvious feature of the market this year, which is that the volatility of steel prices has become smaller. For steel traders, the difficulty of operation has become greater. Coupled with the tightening of monetary policy this year, the cost of capital has risen, the risk of steel traders is even greater, and there is a lack of enthusiasm for picking up goods. This year, we counted the five major social stocks in the major cities of the country, which have been lower than last year since the second quarter.

Minsheng Bank: At the beginning of 2010, I published an article in the “Financial Magazine” titled “Revaluation of the Development Space of China's Iron and Steel Industry,” which specifically addressed the issue of the development space of China’s steel industry. In the long run, China's steel industry still has a lot of room for development. The so-called excess capacity is only a structural excess. The current pressure on the steel industry is only temporary. We are still optimistic about the long-term development prospects of the steel industry.

Daily: Let us first talk about the problem of capital shortages. Recently, there have been media reports that many corporate CEOs have run into the road, and there have been incidents in the capital chain that have affected the steel trade industry. For these phenomena, how do you see the two?

Shanghai Steel Union: First of all, I feel that the capital chain breakout incidents in the steel trade industry are not common and are just cases. This year's domestic monetary policy has undergone several adjustments, not only in the steel trade industry, but all industries and industries are facing greater financial pressure. The problems concerning the difficulties faced by private enterprises and small and medium-sized enterprises are more common, because most of the steel trade enterprises are privately-owned enterprises. Therefore, everybody thinks that the steel trade enterprises are prone to capital-breaking.

Minsheng Bank: This kind of path phenomenon is a reflection of the defoaming of the real estate industry at a deep level. In the past few years, the real estate industry has been subject to huge profits, leading companies from all walks of life to start dreams of real estate. The steel trade industry is no exception. Some companies use steel trade as a platform to transfer real estate projects from banks to even real estate projects. There has been a phenomenon in which individual companies have used fraudulent stocks and warehouse receipts to defraud loans from banks. However, this year the country implemented an unprecedented real estate industry adjustment policy, and under the influence of tightening monetary policy, the bank’s credit funds are also very tight. This way, some steel trading companies with “real estate dreams” are prone to liquidity problems, and even capital chains. A break occurs.

However, according to our understanding of the situation, the overall operation of steel trading companies is still relatively normal, although the funds are generally more intense, but only a very few companies have the problem of capital chain fracture.

Daily: What can financial institutions do to solve the financing difficulties of SMEs?

Minsheng Bank: The difficulty of financing for SMEs is a worldwide problem. The root cause lies in the huge uncertainty in the growth of SMEs. Minsheng Bank reduced this uncertainty through measures such as specialized research, industry chain bundling, risk quantification, and decentralized technology, and it has been at the forefront of banking in SME financing. Take the practice of the Metallurgical Finance Division in the steel trade industry as an example. After specialization, we achieved a complete grasp of information flow, logistics, and capital flow in the metallurgical industry through the use of a customer network covering the entire country and covering the entire industrial chain. With a deeper understanding of the metallurgical industry and a deeper understanding of the risk characteristics of the steel trade enterprises, we are able to control risks more effectively. Therefore, we can confidently expand financial support for small and medium-sized steel trading companies.

There is also a problem of financial innovation. Since its inception, we have always emphasized the concept of "concept, smart management" and emphasized the strengthening of financial innovation on the basis of specialization. Specialization allows us to become more familiar with the trading characteristics, risk characteristics, and financial demand characteristics of steel trading companies and to dare to financial innovation. Over the past few years we have launched differential repurchases, staged repurchases, purchase and sales channels, UBS, and domestic letters of credit. A series of personalized business models to get rid of excessive dependence on collaterals and pledges have provided financial support for more than 500 small and medium-sized steel trading companies.

Most of the steel trade enterprises are privately-owned SMEs. The Metallurgical Finance Division actively implements the Minsheng Bank’s strategy of “being a bank of private enterprises and a bank of small and micro enterprises” and has always regarded steel trading companies as the most important strategic customer group. At the current stage, the risks of small and medium-sized steel trade enterprises are controllable. We will never do things like pumping down loans, suspending loans, etc., but we must send in the snow, further improve the methods of classified development and management, strengthen business model innovation, and continue to support those real Steady operating customers.

Daily: When it comes to financing difficulties for SMEs, financial institutions often complain about the poor creditworthiness of SMEs and their financing risks. How do you view the credit problems of SMEs?

Minsheng Bank: At present, China's credit system is still not perfect, and the company’s default cost is also low. The credit awareness of some SMEs and SME owners is indeed indifferent, but the credit status of most SMEs is still good. The bank headache is how to establish an efficient credit identification method and filter out creditworthy customers. At present, we have accumulated years of industry experience, formed a professional risk prevention and control capabilities, customer resources cover the entire metallurgical industry chain, we have initially had through historical data, upstream and downstream customers, regional similar companies and other channels Recognizing the ability of steel trade enterprises to be credit risk, we do not think that the small and medium-sized steel trade enterprises are in danger of preventing and controlling them. We will continue to strongly support small and medium-sized steel trade enterprises in the future. In addition, we have also noticed that the government has recently stated clearly that it is necessary to establish a credit reporting system that covers the whole society. We believe that with the establishment and improvement of the credit system of SMEs, financial institutions can more easily identify the credit risk of enterprises, so that the majority of SMEs that are honest and trustworthy It is easier to get **.

Daily: How can we fundamentally solve the problem of financing difficulties for SMEs?

Minsheng Bank: The financing difficulties of SMEs are affected by external factors as well as the problems of the enterprises themselves. They must be resolved from both internal and external levels.

As far as external factors are concerned, the phenomenon of difficulty in financing for SMEs reflects the structural and institutional deficiencies in China's financial system. To solve this problem fundamentally, we must reform financial access and interest rate liberalization. We think the following two points are particularly important:

The first is to lower the threshold for financial access and establish more private financial institutions and more small and medium-sized financial institutions. Private financial institutions and small and medium-sized financial institutions also have the power to serve small and medium-sized enterprises and serve private enterprises. In recent years, city commercial banks, rural banks, and microfinance companies have developed rapidly. However, they still cannot meet the financial needs of a large number of small and medium-sized enterprises. The threshold for financial access should be further reduced, so that the private economy can have more opportunities to participate in the financial industry. Develop more private financial institutions and small and medium-sized financial institutions.

The second is to promote the marketization of interest rates. The current level of interest rates does not truly reflect the equilibrium price of funds. The dual-track system of capital prices has emerged in different types of enterprises. The distortion of the price signal has caused some large and powerful companies to occupy too many sources of gold. The large number of “shadow bank” companies in the market can explain the problem. Therefore, we must gradually promote the marketization of interest rates in order to ease the negative impact of the dual-track system of capital prices, so that financial institutions can squeeze more money into SMEs.

From the perspective of the enterprise itself, SMEs must establish a modern enterprise system to make operations, management and financial behavior more transparent and standardized, change the status of information opacity and information distortion, reduce the cost of risk identification for financial institutions, and reduce the “bad money drive out” "The phenomenon can only fundamentally ease the financing of SMEs.

Daily: This cooperation with Shanghai Steel is an “innovation” right now. Can you briefly introduce the cooperation?

Shanghai Steel Union: At present, we are mainly cooperating in launching the “2011 Second Steel Trade 100 Award Selection Campaign”. The steel trade industry is a capital-intensive industry. There are more private and small and medium-sized enterprises, and Minsheng Bank is in financial services. The orientation has many intersections with the steel trade industry. By introducing Minsheng Bank as a strategic partner, we hope to narrow the distance between our steel trade customers and financial service organizations, so that both parties can better conduct business cooperation and achieve a win-win situation.

Minsheng Bank: Yes, this cooperation is also a new attempt for us. In the past four years since the establishment of the Ministry of Metallurgical Finance, we have developed nearly 1,000 customers, basically covering major metal mines, smelting, processing, logistics, and trade companies. The scale of assets inside and outside the watch has reached 120 billion yuan, and the amount of annual funds has reached 200 billion yuan. yuan. We focus on the metallurgical industry. After four years of accumulation, we have already had considerable professional insight and judgment on the metallurgical industry. Our metallurgical financial service brand has already begun to exert influence in the metallurgical industry, and Shanghai Steel Union is an outstanding steel company. Industry information service providers have a strong influence in the steel trade enterprises and the two parties have strong willingness to cooperate.

The steel trading company is the most important customer group of the Metallurgical Finance Division and currently accounts for more than 70% of our credit customers. However, there are 200,000 steel trading companies in China, most of which are private enterprises. The potential for development is huge. Blue ocean for our business development. Therefore, we also hope that with this cooperation, we can allow more steel trade companies to understand our Metallurgical Finance Division and understand our distinctive financial services. At the same time, we can also use the excellent third-party information platform like Shanghai Steel Union to learn more. The industry information, the development of a group of stable operation of high-quality steel trade enterprises, better service for the majority of steel trade enterprises.

Daily: Are there any other areas in the cooperation between the two parties? What kind of services can you provide to enterprises?

Shanghai Steel Union: Our cooperation will certainly be more in-depth, and the specific areas will be determined by the changes in the market. The principle is to proceed in a way that satisfies the common needs of both customers.

Minsheng Bank: At present, we are studying how to carry out cooperation in the field of financial services, combining the professionalization of the industry finance of the Metallurgical Finance Division of the People's Bank of China with the professionalization of the industry information of Shanghai Steel Union, and integrating the advantageous resources of both parties. "My steel net" steel trade company members to provide more value-added services, such as transactions, financial consultants, corporate credit assessment, matching transactions and so on.

Meager profit: steel trade enterprises prudently diversify

Daily: According to our understanding, in developed countries such as Europe and the United States and Japan, iron and steel production companies rely mainly on direct supply to end customers, and the scale of passing traders is relatively small, thus saving the costs and costs of logistics. However, China now has a large-scale intermediate link. Do you think that the ratio of direct supply of Chinese steel companies will reach the level of developed countries? Will the scale of intermediate links be reduced?

Shanghai Steel Union: China is different from Europe and the United States, but also different from Japan and South Korea. The Chinese steel industry has its own characteristics, and it is unrealistic and unnecessary for steel manufacturers to reach their level of direct supply. The overall demand for China's steel is large, but the regional economic levels vary widely. The demand for steel and the demand structure across the country are uneven. On the other hand, from the point of view of production, the production conditions of iron and steel are not the same everywhere, and the scale of production enterprises is also different. It is difficult to establish a good match between supply and demand. For example, automobile manufacturers have a large number of types and specifications of steel, and the amount of steel used is more or less. However, few domestic steel mills can fully meet the purchasing needs of automobile manufacturers.

At the same time, the steel industry in China still has the problems of rapid production growth, serious product homogeneity, and low industrial concentration. Under this competitive environment, iron and steel production enterprises do not have commercial advantages in the face of downstream demand, and establish direct supply. The channel is very difficult. At the same time, we must also face the problem of inventory backlog, capital occupation, and other issues, but can not concentrate on production. These problems are difficult to change in the short term.

In the domestic market environment, the direct supply ratio of iron and steel production enterprises can be increased, but its cost and cost may be higher. The existence of steel traders can make up for the above problems. On the one hand, it can open up sales channels for steel production companies, reduce capital occupation, and allow production companies to better focus on production; on the other hand, it can also provide downstream demand enterprises with More comprehensive resource supply services.

Daily: The scale of intermediate circulation will not be reduced, but the "micro-profit" of purely trade links may be a long-term trend. Therefore, many steel traders are considering transition, and some are gradually involved in real estate, mining and other fields. What is the suggestion?

Shanghai Steel Union: The meager profit of the steel trade industry is determined by the environment. Now the entire steel industry, including upstream steel mills and downstream steel companies, is in a state of marginal profit. The short-term profits of the steel trade sandwiched between the steel industry are meagre. It is also normal. Steel trade enterprises have not yet reached the point of transition to cross-industry. Enterprises should adjust their own strategies according to the environment, but they cannot adjust their business direction freely. When the environment is good, we must take the opportunity to develop; when the environment is not good, companies can retreat, but not Completely retreat. An important point in the development of enterprises is how to overcome the difficulties. Only companies that have experienced great difficulties can be strong.

For the steel trade enterprises, the big environment is not good, and other industries outside the steel trade are also at great risk. It may be more wrong to do more, and it is better to do better than to do it. Enterprises should also base themselves on steel trade and strengthen services.

Minsheng Bank: Yes, I also agree with this view. In order to change the situation of a single trade model and a meager profit, steel trade enterprises have begun to transform, which is also a general trend. However, steel trading companies must also increase their awareness of risk prevention and avoid rash advances. They must stay away from speculative transactions, exposures, and other extremely high-risk issues. Cross-industry investments such as guarantee companies and real estate must also be extremely prudent.

We believe that a good direction for the transformation of steel traders is to transform from a traditional single trader to an integrated supply chain service provider, by providing users in the supply chain with logistics, warehousing, cutting, processing, distribution and more. Value-added services, as a provider of integrated supply chain services.

Daily: If you extend the industrial chain to carry out diversification, what are the advantages and disadvantages of steel trading companies?

Minsheng Bank: If extended in the industrial chain and provide services such as processing and distribution, relatively speaking, steel trading companies have certain resources and channel advantages, and it is easier to upgrade services. Because of the long-term logistics business between steel mills and downstream steel companies, comparing steel mills can provide more meticulous service to downstream steel companies and have more stable sales channels. For many steel companies, because of the small amount of steel used, the cost of decentralized ordering will be relatively high, and there are many aspects of centralized procurement meetings among traders.

However, steel trading companies also have their own disadvantages, the first is the capital. Simple trade services do not have much investment in fixed assets. Generally only a certain amount of start-up capital is required. Leverage can be carried out through such means as pledge, but real industrial chain extensions, such as processing and distribution, require certain fixed-asset investments. "Procurement services also require greater financial support. Such funds are not only larger, but also require more stability, otherwise it is easy to have an impact on the business.

In addition, after the extension of the industrial chain, due to the large investment in capital, personnel, and equipment, its business operations also require more stable customer resources. Unlike trade services, there is a single order, and the environment is not good enough for temporary rest.

E-commerce: Credit issues are the key

Daily: We have just mentioned that one piece is the development of e-commerce. We have seen that there are many e-commerce websites in China. The service content is also very different. How will e-commerce in the steel industry develop?

Shanghai Steel Union: At present, the e-commerce website business model of the steel industry is varied. There are electronic trading platforms and information services, and some companies use the Internet platform to make trading windows and promote products. I think e-commerce, no matter how it develops, should be designed to facilitate transactions or provide services for transactions. Among these, whether or not we can accurately grasp the current market transaction links and provide substantive services or solutions is the key to the success of e-commerce services.

In addition, the development of e-commerce services can not be separated from technological progress, but it can not rely too much on technology, especially the vertical e-commerce services in the steel industry, has a relatively high professional requirements for the industry, needs to be able to change according to the changing needs of customers , providing corresponding services and solutions, and some even one-on-one customized services, which is more inseparable from the professional service personnel convenient and efficient service.

Daily: What kind of concrete service model does the steel industry e-commerce have? What role will financial institutions play in this?

Shanghai Steel Union: The e-commerce of the steel industry should be for trading, and its service model is also centered on facilitating transactions. For example, “My Steel Network” mainly provides basic data for spot trading prices and provides information services for transactions. Our “Sou Search Steel” provides resources and builds trading platforms. With the changes in market demand and ideas and the further improvement of technology, late-stage e-commerce can continue to infiltrate other aspects of transactions, such as transaction services and warehousing services. The potential of e-commerce in the steel industry is large, but professional requirements are high. It requires an in-depth understanding of market demand. For the specific development model in the future, the entire industry is still under exploration.

Minsheng Bank: E-commerce can make information more transparent, circulation costs more cheap, transactions more standardized and convenient, service standards, should be one of the development trend of the steel industry. China's iron and steel industry has about 10 trillion in annual total logistics and 200,000 steel trading companies, most of which are small and medium-sized traders. The market space for e-commerce is incalculable.

We have begun research and exploration of e-commerce. We have already cooperated with Shanghai Steel Source, Guangzhou Steel Exchange Center and Tianjin United Commodity Exchange. We can provide system docking, buyer and seller, and fund settlement for e-commerce. Other services.

Daily: Are there any key issues that need to be solved in the steel industry e-commerce?

Shanghai Steel Union: There are many problems that need to be solved and overcome in e-commerce websites, especially for steel products. The transaction involves a large amount of money, a variety of specifications, and high logistics requirements. It is necessary to facilitate transactions and ensure the safety of transactions. The credit issue of enterprises is indeed a key issue. E-commerce transactions are often conducted by small and medium-sized enterprises, and the credibility of SMEs has some shortcomings. If the credit problem is solved well, the other parts of the transaction will be much smoother.

The "Top 100 steel trade enterprises" selected by us is to hope to solve the problem of corporate credit to some extent. Through the evaluation of the "Hua Xia D&B's" objective authority, we will give an assessment of the company's credit.

Minsheng Bank: In the field of e-commerce in the steel industry, credit issues are indeed very important. The first is the credit issues of the companies that provide e-commerce services. Because the transaction funds are very large, how to ensure the safety of funds is crucial, and the steel industry is still lacking. Relatively authoritative and secure third-party payment platforms require more powerful e-commerce service providers on the market. Second, steel companies' credit issues. From the perspective of **, how to ensure the authenticity of e-commerce transactions, especially How to clarify the ownership of the goods under the transaction is still an important issue for banks.

Daily: Last but not least, what kind of cooperation will Minsheng Bank and Shanghai Steel Union consider in the e-commerce of the steel industry?

Shanghai Steel Union: Our service content will also be optimized and adjusted according to customer demand. This year's financing problem is particularly acute, and Minsheng Bank has unique advantages in financial services in the metallurgical industry. Therefore, we will strengthen our cooperation in financing in the future. , The introduction of Minsheng Bank in e-commerce services provides credit financing services to our customers.

Minsheng Bank: We have already had some experience in e-commerce financial services in the steel industry. Shanghai Steel Union has many member companies. Through two years of top 100 steel companies' selection activities, Shanghai Steel Union’s credit status for steel trade companies also has It is well understood that we are considering reliance on the Shanghai Steel Union’s e-commerce platform to conduct mass development of member steel trading companies with sound operations and good credit, and provide them with financial services such as settlement and financial services.